A fintech cluster greater than the sum of its parts

Elaine is Manager, Investment and International Relations at the City of Edinburgh Council, with responsibility for investor liaison and international and EU affairs.

Edinburgh was named the best UK city in which to launch a start-up in 2017. (Source: Invest Edinburgh)

Elaine Ballantyne

One of Europe’s largest financial centres and an international technology hub, Edinburgh will play a leading role in driving the UK’s £20bn fintech industry and shaping a fast-moving global industry.

Edinburgh’s financial credentials are beyond question. As the UK's second largest financial services centre, and the fourth largest in Europe, the city claims the lion’s share of £1tn of assets under management across Scotland.

Scale, diversity and compactness are key to the city’s financial offer. We have boutique and world-class financial marketing companies; predictive analytics and risk consultancy practices; first class recruitment consultancies; world-class universities turning out computing science graduates and data scientists; large retail banks; investment banks; and general insurers – we have the whole nine yards.

“One plus one equals three in Edinburgh. From my office I can, within a 20-minute walk, meet most of our members. How could I do that in London? I'd spend most of my day travelling.” adds Jones.

Fintech fundamentals

Just as importantly from a fintech perspective is the fact that Edinburgh is home to CodeBase, the UK’s largest technology incubator, as well as a vibrant, supportive digital community.

Scotland’s capital was named the best UK city in which to launch a start-up in 2017 by Expert Market, and it already has one of the highest concentrations of people working in tech in the UK, with 25,109 people employed in digital companies.

Rising fintech stars such as Nucleus Financial, which has £12.5bn funds under management and more than 85,000 customers across the UK, AIM-listed accountancy software firm, FreeAgent and personal financial assistant app, Money Dashboard were all founded and continue to thrive, here in Edinburgh.

As Edinburgh’s fintech community coalesces around a shared vision, the expectation is that Scotland’s capital should be aiming to climb towards the world’s top ten fintech hubs.

“Fintech is a fusion of two very different industries: financial services and technology,” says David Ferguson, Chief Executive, Nucleus Financial, who has grown his business from three people in 2006 to more than 180 today. “How do we take Edinburgh’s current financial services expertise and reshape it towards a more data literate industry?

“Whether those people change within large organisations or whether they change by joining up with agile start-ups and fintechs, it doesn't really matter, but the change needs to happen. A lot of the jobs that exist today risk becoming irrelevant in 10 years’ time.”

Since taking up his role as one of two Scottish fintech envoys appointed by HM Treasury to champion the sector, David has teamed up with SFE's Fintech Steering Committee, which now includes 20 members from Scottish Enterprise, Scottish Development International and the University of Edinburgh to The City of Edinburgh Council, global financial institutions, fintech SMEs and perhaps most importantly, the Financial Conduct Authority (FCA).

The appliance of data science

Edinburgh has another ace up its fintech sleeve: the involvement of the University of Edinburgh in shaping and supporting a shared fintech vision for the city – primarily through its world-renowned School of Informatics. What’s more, as part of the University’s commitment to supporting the regional economy, it’s aiming to train 100,000 data scientists over the next 10 years, ensuring a rich talent pool capable of supplying a growing fintech sector.

The University has also just partnered with Hong Kong-based cryptocurrency research and development company, IOHK, to create a $1m Blockchain Technology Laboratory.

Regulation will fuel the revolution

The UK fintech sector is now preparing for the launch of the PSD2 and implementation of Open Banking Standards, which come into effect on 13 January 2018.

The new legislation, which requires every bank and credit issuer in the UK to open their transactional banking data to regulated third parties, is seen as removing a significant barrier to the fintech revolution. It also reflects the fact that larger financial institutions have moved from a position of resistance to adoption, with fintech now considered central to their business strategy.

The presence of early-stage capital, strong professional services, an educated workforce with international reach, exceptional local academic capabilities focused on data science and a rich heritage of financial services mean Edinburgh is ideally positioned to capitalise on the forthcoming Open Banking revolution.

Helping to unlock that potential will be an increased focus on co-location in the city. Edinburgh already boasts Seedhaus, a dedicated incubator for fintech businesses, as well as the newly launched collaboration between RBS and Entrepreneurial Spark, which has seen the launch of a new fintech hatchery at RBS’ Edinburgh headquarters.

The SFE Fintech Steering Committee are also working together to deliver a dedicated city centre hub which, for the first time, will bring Edinburgh’s unique strengths together, in one location, helping to unleash the full fintech potential of Scotland’s capital.

Fintech Scotland will be different from other global fintech hubs. Its blend of financial expertise and connectivity, enhanced through access to powerful super-computing, globally recognised advanced capabilities in data science, machine learning and big data, will be irresistible.